“Primarily, short selling needs to be flagged – that’s the most important feature. WSE will also have the possibility to suspend short selling in the event of a significant decrease in the value of the WIG index or the price of individual shares; in the event of the significant increase in settlement risk, on the basis of the information from the National Depository; [or] if required by the safety of exchange trading or the interest of trading participants ([and] also on the request of the Polish Financial Supervision Authority).”
The bourse has been in discussion with the PFSA for much of the past six months on relaxing Poland’s restrictive rules on shorting.
Ziebiec suggested that, once the short selling hurdle was cleared, the exchange would enjoy a boost in liquidity and be in a good position to begin offering new products.
“We’re looking at expanding our product offering,” he said. “After the summer, we will launch an exchange-traded fund. It will be a tracker of the WIG 20 index. We are very keen for that to start trading.
“After short selling begins, we will see more hedging using derivatives, which will provide a boost in liquidity for futures and options trading. After this, it will be possible to launch new single stock futures [as] we will have more market makers.”
In March, the WSE launched single stock futures on Polska Grupa Energetyczna (PGE), Polskie Górnictwo Naftowe i Gazownictwo (PGNiG) and Asseco Polska – all members of the WIG 20.
The exchange has also won recognised status from the UK’s revenue and customs service, HMRC, making the market more attractive and accessible for UK-based investors.
“But,” Ziebiec cautioned, “It’ll take time to develop short selling. Our brokers will need time to adapt.”
The bourse’s May volumes were up 57% year on year at 1.66m contracts, 1,500 shy of March 2010’s record. Open interest in all derivative instruments was 204,000, the highest ever level at month end. Trading volumes for the first five months of this year are 6.9m, 32% above the first five months of 2009.
Trading in WIG 20 index futures again led the way, with 1.54m contracts changing hands. WIG 20 options trading also grew, with 67,000 contracts traded. Some 292,000 have been traded since the beginning of the year, accounting for 70% of options trading volume.
Trading in single stock futures, however, was down 21% year on year, at 41,000 contracts.
Tom Osborn +44 207 779 8361 tosborn@fow.com